Wednesday, September 19, 2012

America's Improving Housing Starts - Keeping Things In Perspective

Updated January 25th, 2013

Recent data releases are showing some improvement in America's much beleaguered housing market, including single-family home starts which were up December to an annual rate of 954,000.  This is the very close to the strongest pace in more than two years as shown on this chart from FRED:

Although a bit volatile, things look pretty good, don't they, particularly when compared to the depths of despair that the housing market reached at the nadir of the Great Recession?  Starts are up from an all-time annual low of 478,000 to December's 954,000, an increase of 99.6 percent.  All is well, right?

Let's look back at housing history from the past two generations as shown on this chart:

Now things don't look quite so great do they?  The most recent monthly data shows that housing starts are down 58 percent from their pre-Great Recession peak of 2.273 million in January 2006.  In fact, looking back through all records, current levels of housing starts are off 62 percent from their all-time peak of 2.494 million in January 1972. 

Looking back to 1959, the worst 47 months for housing starts were found in the period between 2009 and the present.  The worst level of housing starts in the 1991 - 1992 recession was 798,000 and in the 1981 - 1982 recession, the worst level was 837,000 starts, both above current levels.  What is even more sobering is the fact that the United States population has grown substantially during the period from 226.4 million in 1980 to 248.7 million in 1990 to 311.6 million in 2011.

While current data may look impressive, when put into historical perspective, it's quite clear that the housing market "recovery" can hardly be termed "strong".  

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